What Mel Karmazin couldn’t tell the world while his company Sirius XM Radio was being stalked by Dish Networks, was that things were going fine. Now the company has reported, with what must appear stunning results given the nature of the times we are in and the company’s supposed reliance on the US automobile industry, which for the most part, is in tatters.
Revenue for the full year of 2008 is up 18% compared to how the two separate companies Sirius and XM were doing prior to the merger, to $2.44 billion. Curiously we can remember quarters when these companies would do less than $100 million in revenues and lose tens of millions of dollars and yet they were the darlings of Wall Street. Now that liquidity is king, that type of valuation is miles away.
More importantly subscribers were up over 19 million, a 10% rise from 2007 and the company claims that it had positive income from operations in the fourth quarter of 2008.
“In the fourth quarter 2008, the company’s first full quarter of combined operations, Sirius XM made remarkable financial progress,” said Mel Karmazin, CEO. “For the first time in company history, we reached positive pro forma adjusted income from operations of $32 million, as compared with a loss of $224 million one year ago.’ That’s all very well but the company still had a net loss of $246 million consolidated loss once everything was taken into account ‘ interest, loss from redemption of debt and loss on investments. The strong thing is that costs were down and the business only used $152 million during the entire year in cash to run operations and that operationally cash turned positive during the last quarter, and now, after its deal with Liberty, it has $380 million in the bank.
Fourth quarter 2008 revenue of $644 million grew 16% over the year ago quarter.’ During this quarter, when the company’s valuation was a pittance, and concern over the company’s viability was rife, it increased subscribers by 83,000, to complete a year which took subscribers up by over 1.6 million above the 2007 level.
Karmazin also revealed that costs have come crashing down post merger, something that we predicted over two years ago when the deal was first suggested. Cash operating expenses declined 22% for the last quarter, a $219.8 million decrease in operating expenses.
Satellite and transmission costs were down marginally, as was programming and content, and there was a big drop in royalties and revenue share, down $41 million, but this was mostly because last year there was a big one off payment here. Equipment costs was less than the two separate companies and subscriber acquisition costs fell from $181 million to $133 million in the last quarter.
Sure the loss for the year, which included a non-cash impairment on goodwill of $4.7 billion after the merger, was $5.3 billion, but on the positive side the company was still left standing after it repaid $1.1 billion of debt during the year. Debt stands at $3.25 billion, including $399 million of short term debt that the company still has to pay off over the next year or so.